Time to rethink our traditions: Skill-based evaluation and pay

Have you ever found yourself saying any of these:

  • “I know they are essentially doing the same job but their levels of mastery in what they do are so different and we’d like to differentiate their pay in a systematic way.”
  • “He has a rare skillset that we need but he is asking for a salary that’s outside of his pay range – and we cannot make that an exception in the company.”
  • “We know we should be looking at the job, not the person, but what they do is so unique!”
  • “Candidate asks for this package but we have no reference pay data from the market to determine if it’s equitable or not – and we’ve had to widen our pay range to accommodate many situations like this.”

We heard our clients talk about such issues one too many times.

Recently, one of our clients, a global manufacturer of food products, implemented a global job leveling framework and a salary structure based on career levels. They have been able to apply the framework and the structure to all parts of the organization except for one research unit. The jobs in this unit continually evolve, have broader responsibilities than their job descriptions describe and are pivotal for the long-term growth of the company. Because of the agile nature of these roles and their broad responsibilities, our client is struggling with how to evaluate these jobs and fit them into the overall framework and salary structure.

Why do these issues arise now? What changed?

We typically think about compensating and leveling a job based on a grade or job level, but given the way the workforce is changing and how jobs are being redefined, there’s a renewed emphasis on skills and hiring the skills you need to complete work.

The fast-changing market demands organizations to be agile and respond to change swiftly

Need for agility

The fast-changing market demands organizations to be agile and respond to change swiftly by hiring and deploying employees with specific skills required to support whenever and wherever needed and not just for a specific benchmark job.

Flexibility

The workforce is demanding flexibility, individualization and less rigidity in their jobs. In response, organizations start to accentuate individual differences in roles and responsibilities according to what employees can bring to the table, which results in additional factors such as technical skills and specific competencies organizations need to think about while determining levels and pay rather than purely based on job itself.

Gig economy

The rise in the contingent workforce is changing the way we work and employ and reward our employees. These free agents allow organizations to cherry pick the skillset they need and for the duration of time they want without long-term commitment, which requires organizations to think about filling the skill sets they need rather than the jobs.

Free agents allow organizations to cherry pick the skillset they need without long-term commitment

All of these changes in the workforce and their needs lead us to a VERY big question:  Will we still benchmark and evaluate jobs and salaries in a traditional way, or will we benchmark and evaluate skillsets and work?

We conceived the ”skill-based evaluation and pay” idea to keep up with changes such as the rise in the contingent workforce or increase in demand for individualization that come with generational differences. With skill-based evaluation and pay, we aspire to be able to provide a methodology that will:

  • Allow organizations to stay nimble and agile in utilizing critical talent
  • Provide businesses with the flexibility to change and re-scope roles, as needed
  • Offer competitive and individualized pay packages based on competencies and levels both for employees in the traditional employment model and for contingent workforce

So what is skill-based evaluation and pay?

It is evaluating and paying for talent based on competencies and skills required to perform the work that need to be completed.

Leveling

Today when we level a job, we always tell our clients “don’t think about the person, think about the job.”  With this idea, we are proposing evaluating a skill set that is needed to complete the work identified by the company.

Benchmarking

Similarly, today when we come across a job that does not fit into our traditional way of thinking about jobs, we call it a non-benchmark job.

As the number of non-benchmark or hybrid jobs increase, this skill-based pay idea will allow us to market price a set of competencies and skills and actually calculate a market rate for the talent needed.

This would require linking competencies to survey compensation data and developing an algorithm that would calculate the market rate.

Skill-based evaluation and pay is not intended to replace the standard market pricing or leveling process. Instead it is intended to supplement the current methodology in situations where our current methodology falls short:

  • when a well-defined benchmark job doesn’t exist
  • when an organization is hiring free agents for specific activities
  • when an organization is interested in crafting individualized jobs

This idea will be most useful for certain functional areas such as research and development and information technology, where traditional market pricing might not be sufficient, and certain companies, such as start-ups, where more employees wear 4-5-6 hats in a single day.

In the future, this alternative approach to leveling and benchmarking could become more prevalent.

More to come on these approaches as we plan to further explore this concept both internally considering our own methodologies, systems and frameworks and also with our clients that are facing such challenges.


 

Guest blogger Piril Erkul is a Senior Analyst in the Rewards, Talent, and Communications group (RTC) of Willis Towers Watson, based Chicago office. Piril focuses on broad-based rewards, as well as sales force effectiveness and rewards work.

Guest blogger Molly Glantz is a consultant in Willis Towers Watson’s Talent & Rewards segment in the Chicago office and has been with the firm for 4 years. Molly focuses on broad-based compensation analyses, salary structure development and job architecture and career framework development.

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